Starting A Technology Business

Dr. Tim Willis, CEOEdinburgh

Overview

1. My Product, Me, My Company

2. Could You Be An Entrepreneur?

3. Your Business – what, why, how?

4. What not to do

5. Questions

My Product: Flexible Text Expansion

Converts any reasonable abbreviation into full

• wd → would• xprc → experience• tfon → telephone• lrng → learning• 2mrw → tomorrow• 428 → fortunate• abv8n → abbreviation

Unique““Simply, awesome!”Simply, awesome!”

““Love it a lot.”Love it a lot.”

““Cool keyboard, way faster than Swype”Cool keyboard, way faster than Swype”

Previous History• BA Linguistics & Phonetics (Leeds)• MSc Cognitive Science & Natural Language (Edin)• PhD Informatics (Edin) ‘A Flexible Expansion Algorithm for User-chosen Abbreviations’

• 5 years Uni Research posts• Schools Liaison (Leeds)• ‘Info service’ for a band• Internet startup (late 90’s)

Where next?1)1) Not a ‘suit-n-tie’ personNot a ‘suit-n-tie’ person

2)2) RA posts – no permanenceRA posts – no permanence

3)3) Disability communication – valid need but little fundingDisability communication – valid need but little funding

4)4) Lecturer – too late? Been too unfocused?Lecturer – too late? Been too unfocused?

5)5) If your ideal job doesn’t exist, can you create it?If your ideal job doesn’t exist, can you create it?

My Opportunity

• Autumn 2006: Commercialisation Funding from Uni

• £6k – 3 months - build proof-of-concept.• Then more raised.• …Somewhere evolved into a business.

• £72k total raised (loan / grant).

…but I still own 96%

Progress so far...

• Android Market / Google Play 14 monthsAndroid Market / Google Play 14 months• c. 15k downloads, almost no marketing – will explain whyc. 15k downloads, almost no marketing – will explain why• Free + Pro. Please download & rate!Free + Pro. Please download & rate!• Great rating – 4.5 / 5 stars, sometimes 4.6Great rating – 4.5 / 5 stars, sometimes 4.6• How many Android phones here?How many Android phones here?• Lots of competition!Lots of competition!

Your Business1. You

2. Product

3. Markets

4. Where to start

5. Money

6. Development

7. Intellectual Property (Patents etc.)

8. Team

9. Marketing

10. Competition

11. Reviews

12. Legal & Accounting

Could you be an entrepreneur?““Are there direct applications for my research or knowledge Are there direct applications for my research or knowledge

that haven’t been done, or could be done better?”that haven’t been done, or could be done better?”

“ “ Are there other applications? …& will anybody buy them?”Are there other applications? …& will anybody buy them?”

Why would I want to do that?Good & bad:Good & bad:• Your own boss (until investors) – take a break when you want BUT never off-dutyYour own boss (until investors) – take a break when you want BUT never off-duty• Unknown outcome – HIGH RISKUnknown outcome – HIGH RISK• Novelty most daysNovelty most days• Running on vapour!Running on vapour!• Trying to persuade others it’s worthwhileTrying to persuade others it’s worthwhile• Spinning many platesSpinning many plates• Probably working from homeProbably working from home• Don’t need to know how to do something, just how to find someone who does.Don’t need to know how to do something, just how to find someone who does.

(& pay them)(& pay them)

What’s the big idea?

Product + Market = Opportunity• Tech: Fiercely competitive. “Me too” productsTech: Fiercely competitive. “Me too” products• HardwareHardware• SoftwareSoftware• ……a bit of botha bit of both

• 2016: 310bn apps downloaded (Gartner)2016: 310bn apps downloaded (Gartner)• 93% free93% free• $46bn revenues$46bn revenues• In-app purchasesIn-app purchases

Markets• Segments – can you sell the same thing (with Segments – can you sell the same thing (with

slight modification) to lots of different groups?slight modification) to lots of different groups?

Low volume High volume

Low price X

High price

Nobody will tell you your baby is ugly

Seek impartial views• 90% of new businesses fail in year 1*90% of new businesses fail in year 1*• Your friends will all tell you it’s greatYour friends will all tell you it’s great• Get independent opinions asap Get independent opinions asap – – WILL ANYONE BUY THIS? WILL WILL ANYONE BUY THIS? WILL ENOUGHENOUGH PEOPLE? PEOPLE?

• House o’ sad photosHouse o’ sad photos• Don’t delude yourselfDon’t delude yourself• If you have to, walk awayIf you have to, walk away• Try and have an escape route…Try and have an escape route…

• ……you will be more employable!*you will be more employable!*

* Unreliable source

The best doesn’t always win...

vs.

“Now you don’t need to throw out your cassette collection!”

Where to start?• StudentsStudents

– Supervisor / Director of StudySupervisor / Director of Study– Launch.EdLaunch.Ed– Commercialisation deptCommercialisation dept– Scottish Institute for Enterprise (SIE)Scottish Institute for Enterprise (SIE)– Starter for 6 (formerly run by NESTA)Starter for 6 (formerly run by NESTA)

• YoungYoung– Prince’s TrustPrince’s Trust

• EveryoneEveryone• Networking eventsNetworking events• Scottish Enterprise (SE)Scottish Enterprise (SE)• Business GatewayBusiness Gateway

Business PlanOut of date before you hit Save. Never-ending.Out of date before you hit Save. Never-ending.

‘‘Roadmap to success’ – 3-5 year’s predictions for company’s activities and Roadmap to success’ – 3-5 year’s predictions for company’s activities and salessales

Covering all the sections in this talk, Executive Summary at the front.Covering all the sections in this talk, Executive Summary at the front.

Business ModelHow are you going to make money?How are you going to make money?

In Magic Rainbow LandIn Magic Rainbow Land

PRODUCT + EFFORT + MONEY + TIME + LUCKPRODUCT + EFFORT + MONEY + TIME + LUCK

= SUCCESS= SUCCESS

Sell it? Licence it? Give it away and sell round it?Sell it? Licence it? Give it away and sell round it?

Setting upSole Trader / Ltd company / partnerships etc.Sole Trader / Ltd company / partnerships etc.

Need to inform HMRC you are ‘trading’ – even if you’re just Need to inform HMRC you are ‘trading’ – even if you’re just engaging in R&D for now.engaging in R&D for now.

You should be able to learn all you need to begin with for You should be able to learn all you need to begin with for free but will need a professional for Ltd etc.free but will need a professional for Ltd etc.

Sources of Money• GrantsGrants• Friends, Fools & FamilyFriends, Fools & Family• Loans – Government, BanksLoans – Government, Banks• Convertible loansConvertible loans• Equity (shares)Equity (shares)• SALES!SALES!

More on FundingInvestment? Investment?

No: Organic growth: may run out of money; may never gain enough traction BUT own 100%No: Organic growth: may run out of money; may never gain enough traction BUT own 100%

Yes: High-Growth-High-Risk? A smaller share of a bigger amount – ‘the pie’Yes: High-Growth-High-Risk? A smaller share of a bigger amount – ‘the pie’

In-between? In-between?

Angels, Venture Capitalists (VCs), Dragons…Angels, Venture Capitalists (VCs), Dragons…

VAT registration? VAT registration? If spending a lot pre-trading, can reclaim it BUT:If spending a lot pre-trading, can reclaim it BUT:

you have to charge it on everything you sell and hand over the money - quarterly VAT returns you have to charge it on everything you sell and hand over the money - quarterly VAT returns

- time & accountancy fees- time & accountancy fees

The Money Pit• Trying to reduce burn rate vs. being too slowTrying to reduce burn rate vs. being too slow

Rent – home + businessRent – home + business

FoodFood

ProfessionalsProfessionals

ProgrammersProgrammers

DesignersDesigners

AccountancyAccountancy

LegalLegal

Office – computers, phones, power billsOffice – computers, phones, power bills

Product DevelopmentGET IT OUT THEREGET IT OUT THERE

MINIMAL VIABLE PRODUCTMINIMAL VIABLE PRODUCT

No bells. No whistles. Start selling.No bells. No whistles. Start selling.

The most basic functionality that won’t look total crap.The most basic functionality that won’t look total crap.

Fix later – respond to what the users / buyers want.Fix later – respond to what the users / buyers want.

Listen to your customers...• ……but don’t try and please everybodybut don’t try and please everybody

Catch-22

TOO EARLYTOO EARLY

Too many bugsToo many bugs

Not enough featuresNot enough features

= Bad reviews= Bad reviews

One-shot with many One-shot with many reviewers and reviewers and

investorsinvestors

““Yeah I tried that, it was Yeah I tried that, it was crap”crap”

TOO LATETOO LATE

““I already have an app I already have an app for that”for that”

““Didn’t [insert competitor] Didn’t [insert competitor] invent that?”invent that?”

Run out of moneyRun out of money

Never leave the runwayNever leave the runway

Too many other apps to Too many other apps to get noticedget noticed

Overdevelopment

Intellectual Property (IP)• Any knowledge, ways of doing things, computer code, internal reports etc. owned by the companyAny knowledge, ways of doing things, computer code, internal reports etc. owned by the company

• Financial value - potentiallyFinancial value - potentially

• c.f. ‘Publish or Perish’ c.f. ‘Publish or Perish’

– – BUSINESS is EXACT OPPOSITE OF ACADEMIABUSINESS is EXACT OPPOSITE OF ACADEMIA

• Public domain = can Public domain = can nevernever patent patent

- includes journal & conference papers, videos, web pages & chats in the pub. - includes journal & conference papers, videos, web pages & chats in the pub.

• Who owns your student research? Embargo? NDA’sWho owns your student research? Embargo? NDA’s

• Patents get very expensive – ongoing costsPatents get very expensive – ongoing costs

• Trademarks etc…Trademarks etc…

Protection• TM TrademarksTM Trademarks• ® Registered Trademark® Registered Trademark• PatentsPatents• ‘‘Secret sauce’Secret sauce’• Domain namesDomain names

• Freedom to operateFreedom to operate

TeamInvestors prefer:Investors prefer:

‘‘A’ Team + ‘B’ productA’ Team + ‘B’ product

toto

‘‘B’ Team + ‘A’ productB’ Team + ‘A’ product

Rewarding the Team• You have no moneyYou have no money

• ……but lots of equitybut lots of equity

• You may fall out; they may be crapYou may fall out; they may be crap

• ““Google chef” problemGoogle chef” problem

Marketing• c.f. branding, selling.c.f. branding, selling.

• Review sites 10-15% paid-forReview sites 10-15% paid-for• Media – News sites, papers, TV, radioMedia – News sites, papers, TV, radio• Blogs & forumsBlogs & forums• Your users – word of mouthYour users – word of mouth• Every contact you can beg to help; LinkedinEvery contact you can beg to help; Linkedin• Your logo and websiteYour logo and website• Advertising?Advertising?

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Competition• Is anyone else doing this?Is anyone else doing this?• If not, why not?!If not, why not?!• They ‘validate the market’They ‘validate the market’• Learn from their mistakes and triumphsLearn from their mistakes and triumphs• Are you better? How? (but c.f. Betamax)Are you better? How? (but c.f. Betamax)• Can you partner with them?Can you partner with them?• ‘‘First mover advantage’ vs ‘Never have to educate your market’.First mover advantage’ vs ‘Never have to educate your market’.

Who’s competing with..?• GoogleGoogle• SkypeSkype• FacebookFacebook• PayPalPayPal• YouTubeYouTube• eBayeBay ..?..?

• Would you want to invest in Bing / Google+ ?Would you want to invest in Bing / Google+ ?

EvolveFriends ReunitedFriends Reunited• 2005, sold 2005, sold £120m £120m• 2011, estimated 2011, estimated £5m £5m

MySpace MySpace • 2003, sold 2003, sold $580m $580m• 2011, sold 2011, sold $35m $35m

• Early search engines – Altavista etc.Early search engines – Altavista etc.

This Section...

...Does Not Come With A Free Hat

We’re sorry.• We’ve let you down…We’ve let you down…

• We’ve let ourselves down…We’ve let ourselves down…

• But worst of all, we’ve let our ratings down.But worst of all, we’ve let our ratings down.

Impact of a single 1-star review on your rating

Current ratingCancels out this

many 5-star reviews

3 1

4 3

4.5 7

4.7 13

“Seek Professional Help”• IP lawyers, corporate lawyers, accountants, will all give you a meeting or two for free.IP lawyers, corporate lawyers, accountants, will all give you a meeting or two for free.

They want your long-term business – you might be the next Google :-)They want your long-term business – you might be the next Google :-)

• But once the clock starts ticking it gets very expensive very quickly!But once the clock starts ticking it gets very expensive very quickly!• DIY can be even more expensive if you screw up.DIY can be even more expensive if you screw up.

• Banks give you a load of free stuff you’ll never have time to read.Banks give you a load of free stuff you’ll never have time to read.

What not to doCareful who you partner with / take investment from.Careful who you partner with / take investment from.

MBA feeding frenzy – some are great though.MBA feeding frenzy – some are great though.

““We only need to sell to 1% of this market to be rich”We only need to sell to 1% of this market to be rich”

If at all possible DON’T:If at all possible DON’T:• hire friends to do initial programming because you have no moneyhire friends to do initial programming because you have no money• commit to organising the biggest, most expensive event of your life (wedding)commit to organising the biggest, most expensive event of your life (wedding)• move repeatedly as landlords sell from under youmove repeatedly as landlords sell from under you• get more into debt by doing all theseget more into debt by doing all these

“Sometimes the only way to win is not to play the game.”

Useful links• Mitchell & Webb’s take on The Apprentice:Mitchell & Webb’s take on The Apprentice:• www.youtube.com/watch?v=3ss-59fi4nM

• http://betashop.com/post/32913573235/90-things-ive-learned-from-founding-4-technology

• Loads of advice, lots of contradictionLoads of advice, lots of contradiction

FinallyGet everything in writing & witnessed.Get everything in writing & witnessed.

Products take twice as long as you think they will to reach market.Products take twice as long as you think they will to reach market.

Be realistic – Don’t ask for Be realistic – Don’t ask for £1.2m£1.2m

You may do everything right and still fail.You may do everything right and still fail.

Or vice versa.Or vice versa.

Good luck!Good luck!

Dr. Tim WillisDr. Tim Willis

PLEASE RATE FLEXPANSIONPLEASE RATE FLEXPANSION

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